Banker Bonus Cap Proposal Won’t Be Scrapped, EU Lawmaker Vows

By Jim Brunsden -
Jan 10, 2013

Lawmakers won’t cave in to pressure
from governments to scrap a proposed ban on bankers getting
bonuses worth more than double their salaries, the European
Parliament’s chief negotiator on the compensation curbs said.

Othmar Karas, an Austrian member of the assembly, said he
wouldn’t accept any backtracking on the cap, which was
tentatively agreed on with government officials in December. The
pay curbs are part of a draft law to implement Basel bank
capital rules in the 27-nation EU.

“The parliament does not go into reopening questions which
have been tackled previously,” he said. “The cap on bonuses
has been agreed,” he said, referring to compromise talks last
year led by Cyprus, which held the EU’s rotating presidency
until Dec. 31. Karas made similar comments in an interview
published yesterday by Boersen Zeitung.

Bankers are facing a backlash from EU lawmakers determined
to cut variable pay as part of a quest to reshape lenders as
utilities rather than money-making machines. Public outrage and
shareholder rebellions have already led some banks to limit
payouts.

Cyprus, which handed over the EU presidency to Ireland on
Jan. 1, sought a compromise with legislators, who had called for
a ban on bonuses larger than fixed pay.

Karas’s stance sets up a clash with governments who balked
at the parliament plans, on concerns that they would harm the
bloc’s competitiveness.

Liquidity Rules

Nations including the U.K. have called for an unwinding of
draft agreements on the law brokered on Dec. 13 by lawmakers and
Cypriot officials, including on banker pay.

Under the draft accord, Cyprus agreed that bonuses would be
capped at twice fixed pay, in exchange for the parliament
compromising on the procedure for adopting bank liquidity and
leverage rules.

The negotiations on pay have hampered the EU’s work to
implement the Basel capital rules, and contributed to the bloc
missing an international deadline of Jan. 1 to begin phasing-in
the standards.

Karas’s plan is for the EU to begin phasing-in the rules on
Jan, 1 2014, and then to fall back into line with the original
Basel timetable, which foresees full application of the measures
from 2019, according to Boersen Zeitung.

Karas said he hoped a deal on the draft law could be
reached by the end of this month, allowing parliament to vote on
it in March.

Stefaan De Rynck, a spokesman for Michel Barnier, the EU’s
financial services chief, declined to comment.